Consumer Prices in U.S. Fell 0.2% in May

The cost of living in the U.S. dropped in May for a second month, signaling the world’s largest economy is recovering without causing prices to flare.

The 0.2 percent decline in the consumer price index was the biggest since December 2008 and followed April’s 0.1 percent decrease, figures from the Labor Department showed. Excluding food and fuel, the so-called core rate increased 0.1 percent.

Retailers such as Wal-Mart Stores Inc. are cutting prices to bolster sales as customers face almost 10 percent unemployment and rising foreclosures.

The lack of inflation gives Federal Reserve policy makers scope to leave the benchmark interest rate near zero in coming months and help invigorate the economy.

In the 12 months ended in May, prices rose 2 percent following a 2.2 percent year-over-year gain the prior month.

The core rate rose 0.9 percent from May 2009, matching the smallest year-over-year gain since 1966.

Compared with a month earlier, energy costs decreased 2.9 percent. Gasoline prices declined 5.2 percent, the biggest drop since December 2008.

Food prices, which account for about 15 percent of the CPI, were unchanged. Fruit and vegetable prices declined, while costs of meats and dairy products increased, today’s report showed.

Housing costs remain limited. Owners-equivalent rent, one of the categories designed to track rental prices, was unchanged for a second month and down 0.3 percent from May 2009.

The core index was boosted in May by higher costs for clothing and medical care.

The CPI is the broadest of three monthly price gauges from Labor, because it includes goods and services. Almost 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets.

Consumer Prices in U.S. Fell 0.2% in May, Bloomberg
6/17/2010 9:35:39 AM